FTSE 350 defined benefit pension deficit falls to £149bn

The accounting deficit of defined benefit (DB) pension schemes for the UK’s largest 350 listed organisations fell from £152 billion at the end of September 2016 to £149 billion on 31 October 2016, according to research by Mercer.

Its Pension risk survey, which is based on analysis and projections of FTSE 350 organisations’ financial statements adjusted from their financial year end, also found that asset values dropped from £720 billion at the end of September 2016 to £711 billion at the end of October.

Liability values decreased by £12 billion, falling from £872 billion to £860 billion at the end of October 2016.

Le Roy van Zyl, senior consultant, financial strategy group at Mercer, said: “Rising inflation expectations have put a dampener on what would otherwise have been a good month for pension scheme funding levels. Despite promising signs for developed market economies, the uncertainty around Brexit for UK inflation, interest rates and growth orientated assets means that trustees and sponsors must continue their vigilance. This will particularly be the case if there is a sense that the outlook for the sponsor’s business has been adversely affected.

“Given that clarity around Brexit will not emerge for some time to come, it is important that trustees and sponsors now work through the various potential scenarios and arrive at appropriate outcomes for all. In this way there is still time to take steps to contain risk at an acceptable cost.”